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October 18, 2011 Newsletter Archive

What's Ikea got to do with It?: The Business Succession Lesson The Big Blue and Yellow Box can Teach Us?

I just finished an article in the New Yorker called "House Perfect" by Lauren Collins, about the IKEA Corporation. The article followed the life story of Ingvar Kamprad, IKEA's Swedish creator, business innovator, and owner. As I read the final passages of the article I was struck by Kamprad's seeming lack of a business succession plan. I wondered how someone could build such an empire yet not have his legacy all figured out.

"IKEA is in the midst of a succession crisis," Collins writes. She goes on to say that others have considered Kamprad's reluctance to anoint a successor dangerous to the company's stability. Although Kamprad has three children none has been publically viewed as the face of IKEA, none is being groomed to effectively step into the role of CEO, and it seems unclear whether this family corporation is to remain in the family after all.

This makes me pause. If Ingvar Kamprad isn't actively engaging in succession planning, then who is? And if business owners are not engaging in this activity, then why not?

Like estate planning, succession planning is not always easy. The issues of family dynamics and potential disharmony, aging and death, and money make these discussions most difficult. Business owners have poured their hearts and souls into building their company and future management and ownership is a daunting subject. Will family members be able to step into the picture? Will they succeed in managing the business or will they be forced to sell it? How will the company be transferred?

Your work as a small business owner will be made easier by seeing a lawyer who specializes in business succession planning. One key piece of advice is starting early. If you did not embed a succession plan in place in your business plan you are still okay - better now than never. However, planning earlier is always best. In so doing you create an opportunity to prepare the next generation should they, and you, be interested in maintaining the family in the business.

Ideally it is the best to involve your family in planning discussions. You will be able to then gauge your family members' ambitions and goals and they will understand yours. When viewing your family take an objective approach. Although you may have the concept in mind of "number one son" taking over, that child may have neither the aptitude nor attitude necessary to manage your company. Look deeper and keep an open mind. Where no family members are interested in playing an active management role, it may or may not be best to sell the business; but again, keeping that as an open discussion both with family members and professional advisors is the best step.

Once you do identify a successor(s) who will play an active role in the business, take time to train them. If your business is very prominent, like IKEA, and your potential successors have not been in the public light before, that may be a sign that you are not training as actively as you should be. Train with the concept that you want your business to succeed at all levels. Identify what is best for the business.

In dividing your business, portioning shares equally is not always possible or optimal. Where some children may be far more involved in daily business operations, it may be fairer to pass the business to them and balance the distribution for children not in the business using other assets. Finally, do not forget to seek professional advice from a business succession attorney, your accountant and financial advisor.

The lesson learned from the Ingvar Kamprad story is that putting off planning, keeping your ideas to yourself, not effectively training successors, and leaving too much to speculation is a sure fire way of losing the planning battle. Complicated as it may be, getting into the planning realm just makes good business sense.

We're Growing: Meet Our Newest Staff

Meg Himmelsteib, Law Clerk

Meg is a 2011 graduate of Vermont Law School. She passed the Bar Exam in September 2011 and will be formally admitted to the Vermont Bar on December 7, 2011.

Meg is a 2005 graduate of Saint Louis University. She spent her first three years of college at Saint Louis University's satellite campus in Madrid, Spain, before transferring to the main campus in Saint Louis and receiving her degree in Political Science and International Studies. After graduating from college, Meg returned to northern New Jersey, where she grew up, and worked as a paralegal for a sole practitioner concentrating in workers' compensation and personal injury law.

In her free time, Meg enjoys running, hiking, and baking. Meg currently lives in Quechee.

Contact Meg at 802-457-9492 or at meg@melendymoritz.com.

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